Scottish Power has been ordered to pay £750,000 after millions of customers were hit with an extra fee of £180 a year because they paid their bills by cash or cheque.

The high charges were part of a drive to persuade customers to pay automatically by direct debit.

Customers who opt not to pay by direct debit can be charged a fee to cover the extra expense of processing cheques and cash, but it must not exceed the actual administration cost.

Energy watchdog Ofgem said Scottish Power's fees were unfair and amounted to overcharging of £100 a year per bill.

The £180 fee is thought to have hit Scottish Power's elderly customers particularly hard, because they are more likely to want to pay by cash or cheque

But the regulator has not told the firm to refund the money. Instead it must pay the £750,000 to the Energy Best Deal scheme, run by Citizens Advice, which helps people cut their bills and shop around for the best tariff.

The £180 fee is thought to have hit Scottish Power's elderly customers particularly hard, because they are more likely to want to pay by cash or cheque.

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It overcharged cheque customers between September 2009 and December 2012, forcing them to pay over the odds at the height of the financial crisis.

But Ofgem said the practice had not 'harmed' customers. While Spanish-owned Scottish Power was billing an extra £180 a year, the rest of the industry was charging around £80.

Ofgem began investigating the payments in December 2012, at which point Scottish Power cut the fee by almost half to £97 and subsequently to £95.

Gillian Guy, chief executive of Citizens Advice, said: 'Energy firms are taking advantage of customers when they overcharge for different payment methods.

Ofgem began investigating the payments in December 2012, at which point Scottish Power cut the fee by almost half to £97 and subsequently to £95

'With fuel bills up a third since 2010, costs are already very high, so people shouldn't be paying more than they have to in order to have a warm home and the lights on.

'With trust in energy suppliers at rock bottom, companies need to be up-front and clear about why prices between alternative payment methods differ and by how much.

'Ofgem is right to hold Scottish Power to account for not sticking to the rules and it is good that struggling consumers will benefit as a result of its action.

'It has taken four years for this issue to be resolved so we hope this action is a sign that Ofgem is getting on with current enforcement cases and can find a quicker way to sort these issues out for consumers.'

Sarah Harrison, Ofgem's senior partner in charge of enforcement, said: 'Suppliers need to clearly justify the different prices they set for different payment methods.

'Scottish Power did not have a robust process in place when setting their prices to ensure that the difference between their tariffs complied with Ofgem's rules. We've held them to account for this.'

A Scottish Power spokesman said: 'Scottish Power has co-operated fully with this investigation. We recognise that we did not have a robust process in place but we are pleased that Ofgem has concluded its investigation and made no finding that any specific impact on customers resulted.'

The firm was ordered to pay £8.5million last year after Ofgem found its sales staff had talked people into switching suppliers by making false claims.

Just last week, German-owned energy firm E.ON was fined a record £12million for mis-selling by sales staff on the doorstep and over the phone. Compensation to customers could add up to another £8million.

IS IT TIME TO SWITCH? HOW TO DO IT YOURSELF

Energy tariff prices are in a constant merry-go-round with suppliers battling to pinch customers - you - from each other.

Shrewd consumers can take advantage of this by doing exactly that - moving deals every six months to a year to ensure they are on THE cheapest deal. Even moving every other year will save you significant amounts.

Suppliers offer their cheapest rates via online tariffs so if you're ready to switch, it will certainly pay to do so.

If you are one of the millions of people who have NEVER switched (i.e. stuck with your original supplier), then you will DEFINITELY save a big chunk of cash, possibly as much as £300 a year.

Prices are different all over the country and the cheapest supplier for you will depend where you live. You only need to be interested in the tariff that is going to be cheapest where you live, so do your own comparison to find the best price.

For full details of how to switch your provider and where to find the best deals check out This is Money's guide By Amy Andrew